Howard gives 'absolute' promise on GST petrol

The Prime Minister yesterday gave an 'absolutely irrevocable' guarantee that petrol prices would not rise under the GST, but could not provide any details on how the scheme would work for country motorists.

08 February 2000TOM ALLARD, Economics Correspondent

The Prime Minister yesterday gave an "absolutely irrevocable" guarantee that petrol prices would not rise under the GST, but could not provide any details on how the scheme would work for country motorists.

Cabinet yesterday addressed the issue amid mounting anger in the bush over the Treasurer, Mr Costello's admission on Sunday that there were "limits" to the compensation to country motorists, where petrol prices are about 10c a litre more than in cities.

Mr Howard is understood to have assured his colleagues that there was no way the Government could let fears over rising petrol prices become a reality and a potent political weapon for the Opposition.

He broke from the meeting to tell the media, "we are going to honour our commitment, before pointing out the overall tax package benefit for the bush.

"In the end the wisdom and the national benefit of this terrific taxation reform will break through and there will be sun all around us."

But what Cabinet has been unable to decide so far is how it will achieve this without incurring a heavy cost to the Budget.

The Government's promise that petrol prices "need not rise" under the GST is to reduce the excise on petrol in line with the rise in the GST. The wide differential between city and regional prices would mean cutting the price for city motorists in order to keep the promise to country drivers - at a cost to government revenue.

The only alternatives for the Government appear to be a subsidy for at least those country motorists in the most remote areas, or restrictions on the prices they pay.

But as one GST scare was addressed another arose. Treasury yesterday confirmed the Herald's report last week that draught beer would rise by about 7 percent under the GST. The Government said its promise that beer would rise by only 1.9 percent was based on a carton of beer, which make up 75 percent of beer sales. Mr Howard had said on the John Laws show during the 1998 election campaign: "We have taken care to ensure there is no significant increase in the price of alcohol, and [it] will be no greater than, in relation to beer for example, the normal CPI increase."

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